PEO Contractors More Prominent

Professional employer organizations (PEO) like ADP have been around for some time, handling the human relations and payroll functions of large corporations. Now, small businesses may avail themselves …

Professional employer organizations (PEO) like ADP have been around for some time, handling the human relations and payroll functions of large corporations. Now, small businesses may avail themselves of similar services through what is being termed “staff leasing.” This is when a PEO professional comes to work at the company as a type of co-employer and assumes all responsibility and liability for issues pertaining to human resources, payroll, health insurance and other issues. This means that it’s the PEO that offers those plans, not the business, which can be a beneficial way to operate a small business that couldn’t otherwise fund such services. For more on this continue reading the following article from TheStreet.

There are certain milestones all small-businesses owners reach as they grow from a one-person startup to a multi-employee operation. The moment they realize they can no longer function effectively from their home office in the basement. The moment they make their first hire. And the moment they realize they just aren’t equipped to handle all the paperwork and regulations that come along with building a workforce.

Human resources departments are a must-have for large corporations, but having a dedicated HR pro is a luxury for most small businesses. When there are only a handful of employees, you hardly need someone tending to their needs full time. But as small businesses grow, their needs change. A dozen new employees may need to be hired on short notice, which means crafting job descriptions, determining salaries and designing training procedures. Wouldn’t it be great if you could bring in an HR expert to handle it all?

You can. Many human resources functions lend themselves to outsourcing, allowing small businesses to pay for just the services they need rather than keeping a full-time human-resources specialist on staff. Payrolls, for example, are often handed off to outside firms; industry leader ADP (ADP) processes payments for one in six workers in the United States. Employee benefits can also be handled by an outside vendor, saving business owners the hassle of sorting through mind-numbing health care plans.

One solution that has been growing in popularity over the past decade are professional employer organizations, which operate on the concept of "staff leasing." The PEO provides a dedicated human-resources point person for your company, who works in your offices, handling all the financial and legal aspects of employee relations.

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The PEO you’ve contracted with then becomes a "co-employer" of your business’s workers. Legally, that company (and, by extension, the HR specialist who works in your office) are responsible for employment-related services and liability issues such as risk management, payroll and tax compliance. The way such arrangements are structured is intended to be long term. You don’t hire a PEO for a few weeks to set up a human-resources system and then leave; they stay on as the business grows (or until it is big enough to justify hiring an in-house HR specialist).

One big plus for small-business employees is that they can access benefits through a PEO they might not otherwise be offered. A company of 10 or 20 employees might not be able to offer health care options to its workers, but a PEO, which is legally considered an "employer" for thousands of employees at different companies, can provide a wider range of health care options and better pricing. The same goes for retirement plans and other benefits. A PEO therefore, might help a small company attract a higher caliber of worker because they can offer a more competitive benefits package.

For many small-business owners, PEOs take away the headache of "people management" and free them up to focus on operations. Issues of workplace liability and federal regulations are all handled by someone else with expertise in those areas. But just as a PEO takes on certain responsibilities, they are granted certain rights. As co-employers, they are allowed to hire, fire and reassign employees as necessary. A small-business owner that brings in a PEO must be prepared to give up a certain amount of control and autonomy.

Businesses with only a handful of employees might not need such comprehensive services. They can get along just fine by outsourcing payroll and benefits without needing a daily, onsite human resources presence.

But what about when a crisis erupts? When a disgruntled employee threatens to bring a discrimination lawsuit or when you need help hiring a manager or just need advice on how to handle performance reviews? Specialized human resource consulting companies are available on a retainer or on an as-needed basis for specific projects.

Human-resources consultants can also be brought aboard for more strategic, long-term projects, such as helping craft job descriptions and advise on salaries; offering training and team-building programs to employees; recruiting employees for positions that require specialized expertise; and crafting onboarding programs that ease new employees into the workplace.

Once a business starts hiring, it takes on a whole variety of risks, regulations and potential headaches that can distract from an owner from his or her core mission. The wide variety of human-resources options allow small-business owner to craft an outsourcing solution that works best for them and for the long-term health of their company.

This article was republished with permission from TheStreet.


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